No Income Tax on Income up to ₹12 Lakh

 

New Delhi, Feb 1, 2025:  The Finance Minister’s statement about the Budget 2025-26 outlines a bold vision for India’s growth, focusing on reforms across key sectors that are integral to the country’s long-term economic and social development. By targeting areas like taxation, financial sector reforms, power, urban development, mining, and regulatory systems, the government is looking to drive transformative change. These areas are not only foundational to economic growth but are also vital for enhancing infrastructure, governance, and sustainability.

The Finance Minister’s emphasis on a “Viksit Bharat” or a developed India reflects a commitment to an ambitious growth trajectory, while ensuring that development is inclusive and benefits the broader population, particularly the middle class. The framing of India as the fastest-growing major economy sets a tone of optimism, signaling the government’s confidence in achieving sustainable growth that uplifts household sentiment and drives broader prosperity.

Do you think the focus on these sectors will yield the expected transformative outcomes for the economy, or do you see any areas that might need more attention in the coming years?

The upcoming announcement of the new Income Tax Bill seems to bring some significant changes aimed at simplifying the tax structure while also making it more inclusive. The increase in the income tax exemption limit to ₹12 lakh under the new regime is likely to offer relief to a large segment of taxpayers, especially those in the middle class, who could benefit from lower taxes or no taxes altogether. This is in line with the government’s push to encourage economic activity and improve disposable income.

The increase in the tax return filing limit from 2 years to 4 years is another positive move, offering taxpayers more flexibility and potentially reducing stress around compliance deadlines. For salaried individuals earning over ₹24 lakh, the 30% tax rate is in line with global tax practices for higher-income earners, but it could also spark discussions around progressive taxation and its potential effects on higher-income earners’ behavior.

The Finance Minister’s focus on taxpayer convenience with initiatives like faceless assessments and a taxpayer charter is a step towards reducing bureaucratic hurdles and improving transparency. The shift towards “trust first, scrutinize later” highlights a growing trend towards simplifying compliance, which could ease the burden for many taxpayers and foster a more cooperative relationship with the tax department.

Given these proposed changes, what’s your take on how these tax reforms will impact the broader economy and the middle-class taxpayer? Would the reduced tax burden lead to increased spending or investment, in your opinion?

Key Income Tax Announcements:

• No Income Tax payable up to ₹12 lakh under the new tax regime.
• Tax slabs revised across all income levels to provide additional relief.
• 30% tax rate applicable only on income exceeding ₹24 lakh.
• Tax return filing period extended from 2 years to 4 years, making compliance easier.
• Senior citizens’ interest income exemption limit raised to ₹1 lakh.
• TDS on rent increased from ₹2.4 lakh to ₹6 lakh.
• No TCS (Tax Collected at Source) on education remittances if funded through loans.
• TCS threshold on foreign remittances under LRS increased from ₹7 lakh to ₹10 lakh.

The Finance Minister emphasized that these tax changes align with the government’s vision of a ‘Viksit Bharat’, ensuring financial ease for citizens and businesses. The tax department will continue its “trust first, scrutinize later” approach, focusing on self-assessment and hassle-free processing of returns.

Other Major Announcements:

• Infrastructure Boost: ₹1 lakh crore allocated for the Urban Challenge Fund to transform cities.
• Affordable Housing: 40,000 new units to be completed in FY26, with a ₹15,000 crore SWAMI Fund 2 introduced.
• Financial Reforms: FDI in insurance increased to 100% for companies investing their full premium in India.
• Nuclear Energy: India aims to develop 100 GW nuclear power by 2047, with ₹20,000 crore allocated for research in Small Modular Reactors (SMRs).
• Agriculture: A six-year mission for self-reliance in pulses and a new Makhana Board in Bihar were announced.
• MSME Support: New credit cards and a fund of funds to improve capital access for small businesses.
• Aviation Growth: UDAN scheme expanded to cover 120 new destinations, enhancing regional connectivity.
• Fiscal Deficit: Revised to 4.8% for FY25, with a target of 4.4% in FY26.

The budget focuses on economic expansion, regulatory reforms, and sustainable development, aiming to propel India’s growth in the coming years. With a significant reduction in income tax burdens, citizens can expect increased disposable income, driving demand and investment across various sectors.